This article first appeared in The Edge Malaysia Weekly on November 18, 2024 - November 24, 2024

MALAYSIA welcomed 18.38 million international tourists between January and September this year. While that represents a 27% year-on-year (y-o-y) increase, it is still about a third short of the full-year target.

In 2024, the Ministry of Tourism, Arts, and Culture (Motac) aims to attract 27.3 million international tourists, 36% more than in 2023, and international tourism receipts of RM102.7 billion. However, the latest available data suggests that the country could miss this year’s target, potentially affecting industry players and national coffers.

In an email interview with The Edge, Motac’s agency Tourism Malaysia, which is responsible for promoting the country both domestically and internationally, says while international tourist arrivals reached nearly 18.4 million as at Sept 30, 2024, the figure is 8.6% lower than in the same period in 2019 — before the tourism sector was badly hit by the Covid-19 pandemic.

“The data suggests that a full recovery is still a work in progress,” says Tourism Malaysia, adding that global economic and political pressures are among the key factors for the shortfall.

“Inflation, currency fluctuations and safety — which have impacted the pattern and traveller volumes, particularly from medium- and long-haul [source] markets — have been challenging to deal with.”

This will not be the first time that Malaysia has missed its targets for international tourist arrivals. Against the backdrop of dwindling international visitor arrivals, the country fell short of its targets  from 2017 to 2019 (see table).

Notwithstanding another potential miss in 2024, Tourism Malaysia says it is undeterred from setting a higher target of 31.4 million foreign visitors in 2025, in anticipation of a stronger market recovery and the ability to capitalise on its strategic initiatives. It also aims to draw 35.6 million international tourists in 2026, with a projected tourism revenue of RM147. 1 billion.

It is worth noting that Malaysia will officially assume the chair of Asean on Jan 1, 2025, during which it will host major Asean meetings with delegations from nations including the US, China, South Korea, Japan, Europe, India, Australia and New Zealand. This will be followed by Visit Malaysia Year in 2026.

Tourism Malaysia says it is doubling down on targeted promotional campaigns, particularly in high-potential markets within Asia, and strengthening partnerships with airlines and travel platforms to offer attractive packages and travel incentives.

“These efforts aim to appeal to travellers during the peak season, helping to close the gap as much as possible,” it adds.

The latest data does not surprise those in the industry, who have had the same concerns for a while now. Based on a back-of-the-envelope calculation, the almost 18.4 million tourists as at Sept 30 works out to an average of 2.04 million a month. With three months to go until the end of the year, the additional 6.12 million will bring the total to 24.52 million, putting the total shortfall at an estimated 2.78 million.

According to Tourism Malaysia data for August 2024, Singapore topped the list of tourists coming into Malaysia at 5.77 million, or 35.1%, followed by Indonesia with 2.4 million (14.6%) and China with 2.29 million (13.9%). Data for September is not available yet.

“A potential [three million] shortfall in tourist arrivals against the 27.3 million target is of serious concern,” says tourism veteran Datuk Tan Kok Liang, who is president of the Malaysian Tourism Federation (MTF) and Federation of Asean Travel Associations. He was formerly head of the Malaysian Association of Tour and Travel Agents (Matta).

“It will have a significant negative impact on the tourism sector in terms of tourism revenue and investors’ confidence for tourism infrastructure and projects that are in the pipeline. The sluggish growth compared to pre-pandemic levels basically means that the marketing strategies, customer trends and tourist experiences need to be reviewed to attract more visitors into the country and be synced with current travel expectations,” he tells The Edge.

“Malaysia needs a change in policy framework to empower and enhance funding to the private sector players [for] aggressive marketing campaigns.”

To achieve this, he believes the smaller players need to consolidate to pool their resources and better compete globally.

“The possible shortfall may be the case even with the visa-free travel policy that led to a strong rise in arrivals from China and India during the first eight months of the year. Neighbouring countries, namely Thailand, have been far more aggressive than Malaysia in launching attractions,” says Lee Heng Guie, who is the executive director of The Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-Economic Research Centre (SERC).

He concurs that this year’s target for international tourist arrivals was set too high, noting that tourists from China, who have high spending power, have been trickling in and spending selectively given the slow Chinese economy.

“I doubt the [Chinese] group will reach the targeted five million arrivals by December. A little over three million may be more achievable due to the visa-free policy, which is the best we can offer,” Lee adds.

For some time now, industry players have pointed out that Malaysia is losing out to neighbouring countries that are far more aggressive in introducing attractions and marketing and promotional campaigns.

“The public-private sector collaboration is strong, particularly in countries such as Thailand, Indonesia and the Philippines. Malaysia currently has a strong inclination towards source markets like China, which is not yielding the expected result of five million China tourist arrivals by 2024. We need to diversify into more emerging markets while not forgetting our traditional source markets. A clear direction and targeted segments are crucial to achieving the desired results,” says MTF’s Tan.

It is hoped that the government’s allocation of RM550 million to intensify tourism promotion and activities, as presented in Budget 2025, will contribute towards those efforts.

“To tackle the fierce fight for tourists among neighbouring countries, the 13 states in Malaysia can collaborate with [each other and government agencies] to attract visitors. However, we lack that sort of coordination,” says Lee.

Tan says Kuala Lumpur, Selangor, Penang, Sabah, Sarawak and Melaka are established tourist states.

On the hospitality aspect, veteran hotelier Yap Lip Seng, who is the CEO of Riyaz Hotels and Resorts and former CEO of the Malaysian Association of Hotels, urges industry stakeholders to shift their focus from quantity to quality.

“Quality would be in reference to longer average stay and higher spending power. The industry has long observed that the numbers don’t translate into actual performance. Historically, despite the high number of tourist arrivals, the hotel industry of Malaysia has seen little growth in terms of average occupancy and average daily rates. To this day, we are among the lowest [in occupancy growth] in the region,” notes Yap.

He observes that a breakdown of arrivals into source countries shows that Singapore typically tops the list, followed by Indonesia, China and Thailand.

“Singapore’s arrivals into Malaysia are effectively twice the size of its population and we can’t help but wonder if these are indeed tourists. On the other hand, China arrivals to date are still extremely low compared to the number of China nationals travelling out of China, to the extent that total China tourists to Malaysia are even lower than those going into a single city in Thailand,” says Yap, adding that Malaysia has neglected lucrative source markets such as Japan and South Korea.

“We are unable to attract them to come to Malaysia when we know for a fact that Vietnam and a few other Asean countries are capitalising on the Japanese and Korean markets as source markets. That’s why we need to shift our perspective and focus on better marketing and targeting strategies. High arrivals numbers [alone] do not reflect the nation’s tourism performance,” he stresses.

For context, Tourism Malaysia reportedly said Malaysia saw 1.45 million tourist arrivals from China as at June, from the beginning of the year, a 190.8% increase compared with the 498,540 arrivals during the same period last year.

Industry leaders have attributed the growth in Chinese tourists to the three-year visa-free entry policy, which allows citizens from China to enter Malaysia and stay up to 30 days, effective Dec 1, 2023, until Dec 31, 2026, as well as more direct flights between Chinese airports and Kuala Lumpur.

From Tourism Malaysia’s perspective, while visa-free policies are an essential incentive, multiple factors influence travel patterns from markets such as South Korea and Japan.

“Despite the 20.4% and 36.8% y-o-y growth in September from the South Korea and Japan markets, respectively, the arrivals are still 28.7% and 29.3% lower than pre-pandemic levels in 2019,” says Tourism Malaysia.

Referring to data from the Centre for Aviation, Tourism Malaysia explains that Japan’s and South Korea’s outbound growth is still low.

“Japan outbound travel in 2024 is definitely going to improve but still not enough to reach the level of 2019. One of the oft-quoted reasons is the weak yen, reflecting the broader trend [of weak currency] in travel recovery within Asia-Pacific and Southeast Asia,” it says.

According to the United Nations World Tourism Organization’s Tourism Recovery Tracker, from January to July, Southeast Asia saw a 30% increase in arrivals from 2023, but that is still 12% lower than 2019 levels.

Similarly, the Asia-Pacific region has experienced 41% growth but remains 18% below 2019 levels. Globally, tourism is still down by 4% from pre-pandemic figures, despite an 11% growth over 2023.

“Malaysia’s recovery is consistent with these trends, achieving a 28.1% increase from 2023, yet trailing 10.8% behind 2019 levels. This indicates that there are factors beyond visa policies at play, such as travel costs, evolving preferences and economic conditions in those countries. We are actively engaging with stakeholders in South Korea and Japan to better understand their travel preferences and refine marketing initiatives, ensuring that Malaysia remains an attractive destination despite broader global challenges,” says Tourism Malaysia.

Meanwhile, MTF’s Tan points out that local operators, one of the most badly affected in the services sector and still shaking off the severe effects of the pandemic, continue to face high manpower and overhead costs even during the low season as travel business is seasonal.

He urges the government to promote more domestic travel via incentives especially since the cost of marketing promotions overseas is high.

Data from the Department of Statistics Malaysia shows that the domestic tourism sector recorded 58.6 million and 68.4 million visitors in the first and second quarters, up 58.6% and 23.8% compared with the same periods last year. Correspondingly, domestic tourism expenditure came in at RM24.1 billion and RM28.1 billion during the first two quarters, reflecting y-o-y growth of 25.3% and 28.6%.

Like the figures for international visitors, domestic visitor arrivals and receipts show y-o-y growth but have not caught up with pre-pandemic levels in 2019. Total domestic arrivals in 2023 were still 10.6% lower while receipts declined by 17.7%.

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